17 July 2012
Reporter: Mark Dugdale
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Broadridge releases white paper for mutual fund nominees

Broadridge Financial Solutions has released an industry white paper that explores UK market views on the specific requirements set out in Chapter 5 (investing in authorised funds through nominees) of the Retail Distribution Review (RDR).

The UK Financial Services Authority launched the RDR in June 2006. The review targets the quality and standard of advice available in the financial services sector.

Chapter 5’s rules relate to firms that provide nominee services to retail investors that invest in authorised funds. The rules demand the timely distribution of certain mutual fund information and notification of voting events to all underlying investors.

The aim of the new rules is to supply investors who access authorised funds through a nominee with the same information as those holding units in funds directly. Mutual fund nominees—or intermediate unitholders—will have to make information that informs an individual investor about its investments, such as short reports, available.

“Since the circulation of the RDR consultation paper in 2010 little has been discussed about this particular section of the regulation and its subsequent Policy Statement 11/09 and, as firms manage the broader requirements of the legislation, we believe it is in danger of being overlooked,” said Bruce Babcock, who is president, investor communication solutions international, at Broadridge.

Broadridge’s white paper, ‘RDR Intermediate Unitholder Obligations—The Developing Landscape for Nominees and Retail Investors’, has been produced in association with UK specialist benchmarking and research organisation, ComPeer.

The white paper is based on industry research and interviews with market participants, including wealth managers (execution only, discretionary and advisory firms) and platform providers.

It provides insight into the potential impact that these new rules may have on those holding nominee accounts—banks, brokers, mutual fund holders and fund platforms—and delivers an overview of the challenges and concerns that firms may face.

It recommends that firms should consider moving to an electronic communications environment, implement strategies to manage potential costs and plan ahead for future regulation.

Babcock said: “This piece of research aims to bring attention to the obligations and strategies that need to be considered and adopted by banks, brokers and platform providers in the UK to support their efforts in meeting approaching compliance deadlines, for, even with the possibility of deferral, the guidelines will stand and compliance will be necessary in the near future.”
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